Respect for all People — This is one of the themes in the corporate image Toyota seeks

to project in the future, described in the “Global Vision 2010.” Toyota seeks to become a

truly global enterprise that is respected by all peoples around the world, and is promoting

management with an emphasis on all of its stakeholders. Toyota believes that its

responsibility as a company, and its raison d’etre, lies in bringing about such results as

providing excellent products to its consumers, contributing to the social and economic

development of the local community and global society while respecting the environment,

human rights, and employment, providing business partners with opportunities to do

business, raising stock value for shareholders through stable long-term growth, and making

it possible for employees to take pride in their work and achieve a prosperous lifestyle.

This section introduces the social and economic aspects of Toyota’s activities,

considered important in terms of their relation with all of Toyota’s stakeholders, including

customers, society, local communities, suppliers, dealers and employees, and provides

information on the development of the fundamental thinking, environmental initiatives and

systems of Toyota Motor Corporation (Japan) on an unconsolidated basis.

Soc

ial a

nd E

cono

mic

Asp

ects

65

Relations with Customers

66

Environmental & Social Report 2003

Customers

Toyota Japanese dealer

Amlux Toyota

Customer

Toyota

Customer Relations Division

Sales Group in Japan and overseas Service

Division

Quality Division

Overseas Customer Service Technical Division

Production Group

Research & Development Group

Overseas distributor

Feedback

Cooperation

Schematic Diagram of Customer ResponsesToyota’s Customer First Policy

Since its founding, Toyota has carried out corporate activities based on the concept of “the customer always comes first.” This concept was declared in “The Toyoda Precepts” (established in 1935) which has been handed down as the Toyota Group’s guiding philosophy. Toyota, including its dealers, makes a company-wide effort to build relations with its customers, and all employees keep the “customer first” policy in mind in all aspects of their jobs.

The Customer Relations Division is “the division within the company in direct contact with customers needs.” The staff place an emphasis on the voices of individual customers, through consulting with them and handling their complaints, striving to improve customer satisfaction. The Customer Assistance Center acts as a contact point within the company for customers and has consulted with or handled complaints from about 200,000 people this fiscal year. Toyota is in contact with its dealers throughout Japan to handle customer complaints, and makes a sincere effort to gain customer trust and satisfaction, striving to maintain and increase the number of Toyota fans.

The Customer Relations Division also makes direct proposals to sales, research and development, and production divisions and holds discussion meetings with them, so that customers’ voices can be useful in improving the company’s products and corporate activities.

Looking overseas, Toyota is supporting efforts at its distributors worldwide to strengthen and improve their systems for dealing with customers, as evidenced by the establishment of a Customer Assistance Center in TMCI, China in July 2002.

Customer Relations Division InitiativesCustomers’ evaluations and opinions

are an expression of their expectations of Toyota, so Toyota receives them sincerely and responds in good faith, in the belief that making use of them in its corporate activities will lead to customer satisfaction. Toyota always tries to grasp shifts in customer demands, constantly checking for conformity with its standards, and acting swiftly to resolve any discrepancies.

The voice of the customer is quickly relayed to all related departments and divisions in development, production and sales, where they are helpful to product planning, raising product quality and improving Toyota’s corporate activities.

Approach to Customer Satisfaction

Toyota collects customer evaluation data through wide-ranging information collection activities, including directly through consultations with customers, complaints from customers, and also through quality reports from dealers and questionnaires given to purchasers of new cars, as well as from the results of studies by third party institutions such as J.D. Power.* Furthermore, Toyota collects information indirectly from dealers and suppliers within the Toyota Group.

In order to have the results of data analysis reflected as soon as possible in vehicle production, Toyota is strengthening internal coordination with research and development-related divisions.

Wide-Ranging Information Gathering and Reflection in Development of New Vehicles

*J.D. Power: An international consulting firm that specializes in customer satisfaction research

The Customer Assistance Center which acts as a contact point for customers Introduction of a new model by Amlux Mirar

“Amlux Toyota” Functioning to Exchange Information with Customers

Toyota Auto Salon Amlux showrooms function as a publicity arm of Toyota to offer consultations with customers about purchases and collect customer information to be forwarded to Toyota. In the showrooms, special consulting staff, called “Amlux Mirar,” deal with customer relations, suggesting the ideal car for each person and providing information about it. The information gathered here is input into the database and provided as feedback to the development and sales divisions via the Toyota Intranet.

“New car purchaser evaluation reports” are also a part of these efforts. Customers visiting Amlux salons are provided with a questionnaire to fill out, by which Toyota gathers frank opinions on exterior design, interior furnishings, and features, etc., which are relayed to the relevant divisions. In addition, from June 2002 Toyota started forwarding information to dealers regarding issues that many customers have voiced concerns or doubts about via satellite-linked terminals, called MU-BOX.

See p. 4 for details on “The Toyoda Precepts”

67

Relations with StakeholdersCustomers

In a case where product defects are discovered and it is deemed necessary to take measures to correct them, necessary responses from among the following will be implemented.(1) Contacting the authorities in

accordance with procedures stipulated by the laws of each country

(2) Notifying customers through newspapers or by direct mail and providing explanations at the dealer

(3) Placing a notice on the relevant website(4) Collecting and repairing products free

of chargeIn carrying out a recall, Toyota clearly

spells out the procedures and urges the implementation of appropriate responses.

Ensuring High Quality

In the new model Caldina, which underwent complete redesign in September 2002, Toyota was able to incorporate many ideas from customers that it had gathered earlier, and improve the quality of many of the parts. Some of these ideas included: “a system to switch the color of graduations on the meter to suit customer preference,” “independent seatbelt buckles for the rear seats to facilitate changing seat arrangements and easy fastening and unfastening of seatbelts” and “the adoption of a reversible deck board for higher luggage space functionality.”

Examples of Products Developed Using Customers’ Ideas

Toyota strives to provide information about the quality and safety of its products and services to customers in a timely fashion, employing the following methods.(1) Direct explanations to customers by

dealer staff(2) Labels attached directly to products

and instruction manuals(3) Telephone consultation through the

Customer Assistance Center(4) Disclosure of information on Toyota’s

website

Providing Information to Customers

Toyota has built a system for gathering market information from its dealers around the world. The Quality Division is in charge of analyzing this data and promoting counter-measures in related divisions. It provides explanations to the related divisions, including executive management, regarding measures against product defects, and also audits each division to ensure that appropriate action is taken and to solve any issues.

Procedures and System for Recalls

Basic Policy

Employees examining the deck board

Recall information on Toyota’s Japanese website

The Role of the Advisory Specialist for Consumers’ Affairs

With the recent wave of corporate scandals, consumers are looking at corporations with an increasingly critical eye. Today, the attitude of placing the emphasis on the customer has become a major requirement for the continued existence of a corporation. Under such conditions, the role of the ASCA* as a pipeline between corporations and consumers is more important than ever in promoting the company’s consumer oriented approach and the customer-first doctrine.

It is essential that the directly expressed views of what customers are really seeking, which are difficult to obtain from data and survey results, are conveyed to the company, and that discrepancies in awareness between the company and its customers are corrected. Currently (as of April 1, 2003) there are 144 qualified personnel within Toyota who provide advice on customer-related activities and the creation of products. In March 2003, the Toyota Consumer Relations Advisors Meeting was held to exchange information and carry out reciprocal education activities.

With vehicles considered to have a big influence on people’s lives, the number of people consulting with Toyota regarding safety and other quality considerations has been increasing year by year. Based on this awareness, Toyota will continue activities aimed at understanding customers, centering on those employees with the relevant qualifications.

Shinichi SasakiManaging Officer in charge of the

Customer Relations Division and the Quality Division, Advisory Specialist for Consumers’ Affairs (ASCA)

*Advisory Specialist for Consumers’ Affairs (ASCA): A qualification officially approved by the Ministry of Economy, Trade and Industry. Specialists are employed mainly in the customer relations divisions of corporations, government agencies and various kinds of organizations, where their role is to promote a consumer-oriented approach by consulting with consumers about complaints, and having the opinions of consumers and consumer trends reflected in the development and improvement of products and services.

Toyota places emphasis on making automobiles that reflect its policy of “customer first, quality first.” The key to achieving this lies in Toyota’s approach that ensures high quality across all divisions through the control of quality functions.

Divisions ranging from product planning, development, production engineering and manufacturing to purchasing and sales & marketing are responsible for maintaining high levels of quality in their respective fields, and the leaders of each division meet every year to draft policies regarding quality functions. The annual policies clearly state the intention to achieve customer safety, satisfaction and happiness through Toyota’s products and services.

Toyota’s efforts take the following three principal directions. Each division in charge cooperates with the Quality Division, which is dedicated entirely to ensuring quality, to promote initiatives.(1) All Toyota’s products and services must

meet customer expectations and comply with the laws of the particular country where business is conducted; and preventive action must be taken to ensure that quality or environment-related issues do not arise.

(2) If issues do arise, the causes should be swiftly elucidated and counter-

measures initiated; appropriate action should be taken regarding products that have already been sold to enable early detection and early resolution of issues.

(3) Conduct audits to confirm whether each division is taking appropriate action to maintain high quality levels; work on any areas that require improvement.

Making Safe Vehicles

68

Awareness-enhancing activities

People

VehiclesTraffic

environment

Maintenance of trafficenvironment

*Source: Institute for Traffic Accident Research and Data Analysis — Report on Traffic Accident Surveys and Analyses (FY2001)

Key technologyAmbient

observationtechnology

Accident avoidanceSafe driving

Occupantprotection

Active safety

Passive safety

Minimize injury

Crash avoidancePre-crash sensing

CrashOccurs

Accidentoccurrence stage

Development of safetytechnologies and

practical application

Comprehensive Measures Taken by Toyota To Make Safe Vehicles

Outline of Combined Active and Passive Safety Concept

Pre-crash Safety

Virtual Human Body Model THUMSBasic Policy

*CAE (Computer Aided Engineering): A technology that uses computers to simulate physical phenomena (deformation, stress, heat, vibration, etc.) and utilize the results in designing products and resolving issues

Toyota believes that safety is fundamental for making vehicles. In order to provide vehicles that attain high levels of safety under various conditions and offer an optimal driving experience, Toyota is engaged in developing safety technology using standards established at levels above those legally required, on the basis of the following four points: (1) Comprehensive measures taken from a broad perspective embracing vehicles, people, and the traffic environment; (2) Development of safety equipment and vehicle structures based on advanced technology; (3) Vehicle manufacturing based on results of accident survey and analysis; (4) Overall balance of customer requirements and social needs.

Starting from this approach, Toyota promotes concrete measures to make safe vehicles, based on active safety to make the vehicle less susceptible to accidents and passive safety to minimize the damage or injury caused if an accident does occur.

To analyze the rate of acceleration of the vehicle and the motion of the occupants when a vehicle is involved in a collision, as well as the effect of load and other factors on occupants and pedestrians, Toyota stages experimental accidents with real vehicles and utilizes the findings for vehicle manufacturing. Every year over 1,000 such experiments are staged using more than 100 dummies of ten types differentiated according to age, sex, physical build and other factors.

In order to complement this experimental data, Toyota also makes active use of CAE,* and has reached a level where detailed predictions can be made on deformation and load.

Basic Technology Research

In order to make safe vehicles, it is first necessary to learn from the real world, which is why Toyota believes that accident statistics and analysis of individual accidents are important.

Statistical studies and analyses are undertaken with the cooperation of a range of organizations, including the Institute for Traffic Accident Research and Data Analysis. From a comprehensive perspective encompassing accidents, drivers and vehicles, Toyota investigates the conditions under which accidents occurred, the damage caused, the way in which vehicles were used, weather conditions, road surface conditions, etc., and uses the findings as feedback for technology development.

Accident Survey and Analysis

Active Safety

In vehicle safety, what comes first is the active safety approach, which makes vehicles less susceptible to accidents. The basis of active safety technology is to allow the essential functions of the vehicle —running, turning, and stopping— to be executed in line with driver intentions, and Toyota therefore works to improve these three functions using the latest technology.

As well as integrating findings from ergonomics and traffic psychology in its development process, Toyota also considers the following points to be important: (1) Functions to assist the driver in performing driving operations; (2) Easy driver access to information on the vehicle and its surroundings during operation; (3) Transmission of data to other vehicles; (4) Improvement of the driving environment.

Virtual Human Body Model THUMS

New Technology Developed in FY2002

Pre-Crash SafetyAround 70% of fatalities and serious

injuries are caused by delayed reaction, for instance not watching the road ahead or failing to check for safety. Survey results show that in 40% of frontal collisions, measures to avoid accident occurrence were not implemented.* Responding to these facts, Toyota has developed the “Pre-crash Safety” system which combines active

safety and passive safety. The system assesses in advance when a collision is unavoidable and preemptively activates safety devices to help minimize damage. It is provided as an optional feature on the Harrier launched in February 2003.

The system consists of a newly developed Pre-crash sensor that determines in advance whether or not a collision is imminent, the Pre-crash Seatbelt that increases passenger-restraint performance by retracting the seat belt in advance, immediately after an unavoidable collision is identified, and the Pre-crash Brake Assist that provides increased braking force early on to help reduce collision speed.

The Pre-crash Sensor, which is the pivotal element of the system, is a key technology developed through advances in ambient observation technology based on millimeter-wave radar and other systems.

The virtual model of the human body used to simulate effects on the body, which cannot be measured in collision experiment dummies, is called THUMS (Total Human Model for Safety). From human body shape to bone strength and skin flexibility, right down to ligaments and tendons, the simulation reproduces conditions close to those of the human body and makes it possible to predict the injury to the various parts of the body in a way which was not fully possible with collision dummies. Using this model, Toyota is engaged in vehicle body development designed to further enhance passive safety through elucidation of the various mechanisms by which damage and injury occur in an accident.

Collision Tests and Simulations

69

Relations with StakeholdersCustomers

Active safety

Passive safety2000

Accidentreduction

Driving controlassistance

Assist field of view

Autonomoussafety support

Infrastructurerelated safety supportComprehensive

body control

Optimization of body structure

Add protection equipmentReduce side effect

Enhanced protection againstvarious collision environment

Accident perception andcrash severity relief

Accident occurrencestage

Safe driving

Occupantprotection

Crash avoidancePre-crash sensing

Crash Occurs

Laws and regulationsTypical situations

Provision of safety informationThird-party evaluation

Toyota’s goalReflect the market as widely as possible

Occu

pant seats

Actual accidents Diversification Other parties in collision

Occupant physical build, Collision speed Collision angle Collision position

50km/h

50km/h

50km/h

50km/h

Frontal collisions

Rear collisions

Side-on collisions

weight, age, posture

Direction of Safety Technologies

Pre-crash safety

Approach to Passive Safety Omni-Direction Compatibility

ABS TRC BA VSC

Night View Adaptive Front Light System

NAVI AI shift VDM

Head impact protection system GOA

WIL seat

Compatibility Omni-direction compatibility New child safety seat

Side A/bag Curtain A/bag PT/F L seatbelt

Pedestrian protection

Improvement of Collison Avoidance Assistance System

Passive Safety

Toyota has developed a pedestrian-injury-lessening vehicle body that helps reduce pedestrian injury when a vehicle collides with a pedestrian, and introduced it in vehicles beginning with the Premio and Allion launched in December 2001.

The pedestrian-injury-lessening body consists of improvements made to the vehicle body based on estimates of the degree of injury on pedestrian dummies and THUMS, and helps reduce pedestrian injury through the use of impact-absorbing materials and an impact-absorbing structure.

Protection of Pedestrians

Compatibility is an approach to ensuring safety on both sides in collisions between large vehicles, small vehicles, trucks and many other kinds of vehicles. Differences in vehicle weight, height and other factors make a great difference in the extent of damage in the event of a collision, and it is important that vehicle designs take these differences into account. Toyota applies this approach not only to frontal collisions, but also to side-on and rear collisions, aiming for improvement of omni-direction compatibility in pursuit of passive safety.

Omni-Direction Compatibility

Evolution of Passive Safety PerformanceAs a measure to ensure occupant

protection performance and survival space in full-lap frontal collisions, offset frontal collisions, and side-on collisions, Toyota has developed the GOA (Global Outstanding Assessment) advanced passive-safety body, combining an impact-absorbing body construction with a high-strength cabin.

GOA surpasses safety regulatory standards in Japan as well as Europe and the United States in its pursuit of the world’s leading level of safety in vehicles of all classes. In addition, Toyota is also making efforts to realize higher levels of safety by a review of standards applying to collisions with larger vehicles or those traveling at higher speed.

It is said that approximately 20% of serious accidents are caused by a loss of control, such as lateral skid. In accidents resulting from lateral skid, the following systems are seen as beneficial: ABS (Anti-lock Brake System), TRC (Traction Control), and VSC (Vehicle Stability Control).

VSC is a device designed to help prevent the occurrence of lateral skid due to sudden steering operations or slippery road surfaces. ABS and TRC by contrast, help prevent skidding during deceleration and acceleration respectively.

A Brake Assist system that augments braking force is also thought to be useful in preventing accidents during sudden stops.

Toyota plans to expand the use of preventive safety devices, such as VSC and the Brake Assist system in nearly all passenger vehicle series sold nationwide by 2005.

In 1999, Toyota introduced Japan’s first child safety seat conforming to ISO-FIX* standards which allows for easy and reliable installation. It is mounted on the seat using dedicated ISO-FIX compliant anchors, so if the vehicle is built to conform to it, it can be easily and reliably used.

Most of Toyota’s vehicles conform to ISO-FIX standards, and Toyota is striving to popularize the use of CRS

(Child Restraint System) by also providing child safety seats that conform to ISO-FIX standards for both infants and young children.

Toyota’s ISO-FIX child safety seats have been evaluated highly in passive safety comparison tests conducted by the National Consumer Affairs Center of Japan (NCAC).*ISO FIX:

An ISO (International Organization for Standardization) standard for child safety seat attachments created to prevent improper installation of child safety seats, improve vehicle conformity and set an internationally uniform attachment method.

Introducing Japan’s First ISO-FIX Child Safety Seat

Consideration also needs to be given in accidents to protection of the vehicle occupants and of the pedestrians and cyclists/motorcyclists who may be in a collision with the vehicle.

Passive safety, as Toyota sees it, embraces a wide range of aspects including vehicle bodies that absorb impact effectively, strong cabins that ensure survival space, restraining devices and interior materials that protect occupants, door structure that facilitates escape and rescue, and prevention of the start and spread of fire.

Making User-Friendly Vehicles

70

Customers

Development and Popularization of Vehicles for the Disabled Universal Design

With the advent of an aged society in view, the roles which vehicles are being required to fulfill are growing in terms of promoting participation in society by elderly and handicapped persons. People want their vehicles to possess a range of user-friendly devices and functions to cope with various lifestyles: handicapped people driving their own vehicles, transporting elderly or handicapped passengers, or having handicapped family members join in family outings.

Toyota has been quick to undertake the development and popularization of Welcab1 vehicles for the disabled, under the philosophy of offering all people easy mobility, and as of the end of FY2002 had extended it to 109 types2 in 51 vehicle series. With the aim of giving all people access to the user-friendly technology Toyota has accumulated, ongoing development is being promoted under five key points: (1) Communication and care; (2) Friendliness to drivers and carers; (3) Ease of ingress and egress; (4) High comfort; and (5) Reasonable pricing.

Basis of Welcab Development Toyota’s universal design3 is based on the idea of “diversifying needs and the vehicles to respond to them,” and has been promoted in the framework of efforts to make user-friendly vehicles. Based on the assumption that a wide range of people should be able to use vehicles comfortably and with confidence, Toyota incorporates ergonomic aspects such as ease of ingress and egress and visibility, along with user-friendly features adapted to vehicle category and to specific user purposes, for instance the need to seat grandparents in the back or facilitate a pregnant woman, and specifies these items in “universal design evaluation indices.”

An objective and universally applicable evaluation basis can be extended to all vehicle series. This makes it easier to set developmental targets and for the purchaser to assess the level of performance and special features of the vehicle, and can be used as an indicator when choosing a vehicle.

Quite apart from its importance in adapting to the kind of society expected in the near future, the development of comfortable and reliable vehicles is an important factor in addition to their safety. Toyota is committed to building an even closer partnership between medicine and engineering and to applying the results of continued ergonomic research to Toyota vehicles.

Against the social background of the aging society and the development of a welfare society, the need for vehicles for the disabled is growing every year. In 2002, the number of Welcab units sold by Toyota in Japan was 14,304, a more than 8.5-fold increase compared to 1995, while the number of driver’s license holders restricted to use with vehicles designed for the disabled, or subject to similar restrictions, reached about 235,000 in 2001. This indicates that interest in driving is increasing among the disabled year by year. Toyota supports independence and care-giving by lining up a range of vehicles which are equipped with a variety of applications, such as the Welcab Friendmatic Seat model, Welcab Rotating and Sliding Front Passenger ’s Seat models, and Welcab Wheelchair-adapted model.

Towards the Popularization of Welcab Vehicles

1. Welcab: Name of a series of vehicles for the disabled developed by Toyota. The name Welcab is derived from combining the words “welfare” and “cabin.”

2. Type:Differentiated by Welcab Wheelchair-adapted model, Welcab Side Lift-up Seat model, etc.

3. Universal design: Design that makes using products easier for a larger number of people. In line with continued product development based on the idea that a vehicle easy to use for everybody will be easy to use for disabled persons, the design itself should not present obstacles or barriers.

Raum with Lift-up Front Passenger Seat (Panorama Open Door)

Consideration is given to ease of ingress and egress for pregnant women

0

20

40

60

80

100Vehicle series

’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02

109

51

Type

(%)(Vehicles)

Sales results

Market share

’95 ’96 ’97 ’98 ’99 ’00 ’01 ’020

2,000

0

10

20

30

40

50

60

80

90

70

4,000

6,000

8,000

12,000

14,000

10,000 59.6%

Human characteristics

study

Identification of user needs

Universal design activities

Ergonomic performance improvement

Adaptation to differences in physical build and ability

’98

’99

’00

’01

’02

’03

2000s

1990s

Decade Year

’75

’81

’82

’94

’96

’97

’98

Toyota activities Decade Year Toyota activities1960s - ’70s

1980s

1990s

10014,304

Fulfillment of user needs through

interactive development

Expansion of Welcab Lineup

Sales of Welcab Vehicles and Market Share

Universal Design Initiatives

History of Main Welcab Activities

Opening of Japan’s first Welcab general display space - Toyota Heartful Plaza in Tokyo and Kobe

Side Lift-up Seat newly developed with full electric operation and dismountable features

FunCargo slope-type added to wheelchair-adapted models

Opening in Hiroshima of Welcab general display space Toyota Heartful Plaza

Opening in Chiba of Welcab general display space Toyota Heartful Plaza

Weldrive System newly developed (Estima T/L)

Launch of hybrid vehicle fitted with Welcab features (Prius)

Opening in Nagoya of Welcab general display space Toyota Heartful Plaza

Launch of vehicle (Raum) with Lift-up Front Passenger Seat (Panorama Open Door)

Restructuring of Hiace vehicles for the disabled at Toyota Group specialty manufacturers starts

Sales of restructured vehicles -Handicab and Friendmatic- start, to mark the International Year of Disabled Persons

Launch of Friendmatic II vehicle for users with disability in both arms (Corolla)

Development of vehicle with Rotating Front Passenger Seat (Tersel, Corsa, Corolla II)

Raum receives Universal Design Prize of Good Design Award

Name of vehicles for the disabled series changed from Toyota TECS Welfare Vehicle series to Toyota Welcab series

Welcab features adopted in dedicated taxi modelJapan’s first rotating back seat developed (Crown Comfort, Comfort)

Launch of Japan’s first vehicle with Side Lift-up Seat

71

Initiatives Toward Traffic SafetySociety

Toyota Traffic Safety Campaign Regional Traffic Safety Activities

*Safe Kids Network Japan: A nationwide organization of obstetricians and pediatricians which promotes educational activities for preventing accidents involving children

Toyota has been implementing a wide range of traffic safety activities centering on the “Toyota Traffic Safety Campaign” which has continued for over 30 years since being initiated in 1969. In line with Japan’s Nationwide Traffic Safety Campaign, a total of 449 companies, including car dealers, logistics systems and forklift dealers, dealers, parts distributors and rental/lease dealers, conduct the Toyota Traffic Safety Campaign twice a year, in the spring and autumn.

Toyota has been actively engaged in initiatives related to the following topics: (1) Traffic safety education for children; and (2) Promotion of proper use of seatbelts and child safety seats.

In order to support education for child traffic safety, Toyota has been donating educational materials about traffic safety to new kindergarten and nursery school students nationwide since 1969, with a total of approximately 94 million pieces of such literature distributed so far. These materials include explanations of “proper ways to walk along or cross streets,” “the danger of suddenly running out into a street,” and for guardians, “proper use of child safety seats.” In FY2002, about 44,000 sets of storytelling cards and two million picture books were distributed.

For educational activities related to the use of seatbelts and child safety seats, Toyota distributed 1.34 million educational leaflets in FY2002 explaining the importance and benefits of seatbelts and child safety seats and their proper use, and 1.37 million leaflets about seatbelt use for expectant mothers.

Toyota Child Safety Communication Course

Safe Driving Courses

As a community-based activity, Toyota has invited children from kindergartens and nursery schools in the area of Toyota City, where its head office is located, to take part in activities intended to increase their awareness of traffic safety. This is called the Toyota Safety School, and has been carried out every year since 1975 with Toyota employees themselves providing practical instruction. In FY2002 about 4,600 children participated, bringing the cumulative number of participants over 28 years to 190,000.

Toyota offers a Toyota Child Safety Communication course intended to further popularize the use of child safety seats and prevent accidents resulting from their improper use. The course is geared to mothers and caretakers, and is held in conjunction with the Safe Kids Network Japan* and other organizations. Through explanations by doctors and guided hands-on training, the experiential course encourages the secure installation of child safety seats, teaching attendees why child safety seats are necessary and how to use them properly.

Since 1987, Toyota has held Toyota Driver Communication safe driving courses as part of its traffic safety education activities. As of FY2002, about 7,800 people have attended the courses.

The course program allows drivers to experience the behavior of cars at the limits of breaking and cornering, and study the effects and proper usage of ABS and other safety equipment, with the aim of improving participants’ driving safety. In FY2002, about 800 people attended courses designed to offer detailed information corresponding to a driver’s skill, held at the Fuji Speedway and Sportsland Sugo, as well as Megaweb, which provides a variety of hands-on car-related experiences.

Environmental & Social Report 2003

Since 1968, Toyota has been participating in the Traffic Safety Slogan Poster Design Contest that was established in the hope of reducing traffic accidents (main sponsors are: Japan Traffic Safety Association, Mainichi Shimbun Co.; co-sponsors include: the Cabinet Office, National Police Agency, and the Ministry of Education, Culture, Sports, Science and Technology). The poster awarded the Prime Minister’s Prize is utilized as an educational poster to be displayed throughout the country, beginning with the spring Nationwide Traffic Safety Campaign.

Traffic Safety Slogan

Educational leaflets distributed in FY2002 on theproper use of seatbelts and child safety seats

Toyota Driver Communication course

Toyota Safety School

Hands-on training regarding the use of child safety seats

Poster awarded the Prime Minister’s Prize for children’s category

72

34 organizations including:World Wide Fund for Nature Japan (WWF Japan)The Association of National Trusts in JapanWild Bird Society of Japan, etc.

42 events including:Reforestation project in ChinaRestoration of mangrove forests

Eventssupported orsponsored

Member

Organizations which Toyota Supports, Belongs to, or Sponsors

Satoyama Learning Institute Eco-no-Mori House

Since its foundation, Toyota has conducted business based on the guiding principle of “contributing toward a prosperous society by making things and making automobiles,” while also actively engaging in various philanthropic activities in an attempt to contribute to the development of society. In 1989, Toyota established the “Corporate Philanthropy Committee” chaired by the then President Shoichiro Toyoda (currently Honorary Chairman), created an action structure, and in 1995 drafted the “Philanthropy Principles,” which forms the basis for the philanthropic activities it has been expanding.

In concrete terms, Toyota is developing activities related to such themes as the “promotion of science and technology,” “conservation of the environment,” and “promotion of arts and culture.” Overseas, principally in Asia, Europe and North America, Toyota is promoting activities centering on education and the environment. Also, as a member of the Nippon Keidanren (Japan Business Federation) “One-Percent Club” since 1990, Toyota has contributed more than 1% of its ordinary income on an unconsolidated basis to its philanthropic activities.

In commemoration of Toyota winning the United Nations Environment Programme (UNEP) Global 500 Award,* the “Toyota Environmental Activities Grant Program” was started in 2000 in support of practical projects rooted in local communities, both in Japan and overseas, that contribute to environmental protection and improvement under the key themes of “technology” and “education.”

In FY2002, the grant program received 76 applications from domestic and foreign universities and research institutes as well as environmental NGOs and the general public. The selection committee, consisting of a group of eminent persons from Japan and abroad, based its selections on considerations of the feasibility of the applicants’ activities; the prospects of such activities for future development; their need for support; and how well they consider characteristics of their local communities. A total of 250 million yen was awarded in grants to the 15 organizations that were selected. Given the environmental issues endemic to the rapidly developing Asian region for example, sound projects with a high level of practicality in the fields of “education” and “technology” were selected.

Since the program started, 38 recipients have been awarded a total of about 560 million yen over a period of three years. Toyota will continue to implement the Toyota Environmental Activities Grant Program in FY2003 and beyond.*Global 500 Award:Established by UNEP to recognize individuals or organizations that contribute to greater environmental protection or improvement in terms of sustainable development

As a preliminary event to the opening of the Toyota Shirakawa-go Nature School being built in Shirakawa Village, Gifu Prefecture, Toyota conducted tree-planting activities in June 2002. Also, in March 2003, a Nature School Experience Plaza event was held that was attended by many Shirakawa Village elementary and middle school students. The Nature School is intended to educate children, who are the bearers of the future, through hands-on experiences with nature. Plans call for the completion of a study facility capable of accommodating about 90 people and making use of natural energy, including photovoltaic and wind power generation as well as an air conditioning system that utilizes snow stored during the winter, by the time the school opens in 2005. Toyota is also investigating the creation of a new NPO to oversee the operation of the Nature School.

Preliminary Events to the Opening of the Toyota Shirakawa-Go Nature School

In May 2003, Toyota opened the “Satoyama Learning Institute Eco-no-Mori House,” a new environmental educational facility within the Forest of Toyota, an experimental forest in the satoyama (forests and wetlands near populated areas) of Toyota City, Aichi Prefecture. With environmental awareness increasing and the need arising for experiential environmental education at schools with the introduction of “Periods for Integrated Study,” Toyota has built this facility in order to expand the range of activities conducted by the Forest of Toyota project in line with the basic principle of “coexisting with nature.” The Institute provides environmental study sessions for children, holds Eco-no-Mori seminars and a variety of other educational programs, and serves as the initial reception area for visitors to the facility.

Within the facility various exhibit zones

have been created that use displays of actual objects, films and panels to introduce information concerning such topics as changes in energy and resource consumption and the utilization of biomass (organic resources derived from forest resources and other living matter), which is expected to play a major role in the future recycling-oriented society.

The facilities are constructed of wood and divided into many sub-buildings, with rooftop greening and systems that utilize natural energy and rainwater, and conserve energy and resources.

Together with the Toyota Shirakawa-go Nature School (see following report), Toyota plans to create a base for environmental education and interaction with environmental NPOs, thereby increasing environmental awareness among a wide range of people and enabling the dissemination of information.

Satoyama Learning Institute Eco-no-Mori House Opened

Toyota Environmental Activities Grant Program, Commemorating the Receipt of the “Global 500 Award”

Toyota supports a broad range of environmental preservation activities through membership in and sponsorship of 34 environmental NPOs and other organizations that promote nature conservation and environmental awareness activities.

Support for Environmental NPOs

FY2002 Grant Program“Creation of Eco-School Network by using former

school buildings”(Schools for Forest and Wind, Iwate)

Tree planting by elementary school children from Shirakawa Village

Philanthropy Principles 1. Actively develop corporate philanthropy

based on “Research & Creation” and “For a Prosperous Society.”

2. Foster corporate culture among all employees to be able to proactively practice activities as a corporate citizen.

Philanthropic Activities

Only environment-related activities have been described here. For an overall view of Toyota’s philanthropic activities, please visit Toyota’s website.http://www.toyota.co.jp/IRweb/corp_info/com.html

73

Relations with StakeholdersSociety

(FY)0

5,000

10,000

15,000

20,000(Number)

’98 ’99 ’00 ’01 ’02

Local Community

Local Community

Volunteer needs of the local communityToyota

volunteers

Providing information/raising awareness/

supporting volunteer groups

Volunteergroups

Registeredvolunteers

Volunteer activities(response to needs, independent plans)

Employees/families/former

employees

Toyota VolunteerCenter

ToyotaUnion

volunteersToyotaGroup

Number of Volunteers

Overview of the Toyota Volunteer Center

From 2001, Toyota initiated a reforestation project in China’s Hebei Province, where the environment has undergone considerable degradation characterized in particular by such serious problems as deforestation and rapid desertification, with the goal of covering 500ha each year with poplar, pine and wild apricot trees, reforesting 1,500ha in three years. By FY2002, 1,000ha of trees were planted as per schedule. As one of the companies with business operations in the country, Toyota aims to contribute to environmental preservation in China, not only through reforestation activities, but also by investigating the effects of tree planting on ecosystems, wind flow and subterranean water systems, thereby contributing to the establishment of academic knowledge. Toyota is making a particular effort to plant wild apricot trees since they are an ingredient in a popular Chinese dessert and will contribute greatly to the local economy.

Reforestation Activities in China

The Toyota Volunteer Center was established in 1993 to aid employees, their families, and former employees interested in volunteer activities. The Center supports the expansion of activities and self-reliance in volunteers by providing information and raising awareness to enable them to work enjoyably and safely.

Volunteer Support Activities

In June 2002, Toyota initiated the “Toyota Clean Net” campaign, unifying road beautification activities that were previously conducted on an individual plant or housing works basis, and in August teamed up with the Ministry of Land, Infrastructure and Transport’s Volunteer Support Program with the aim of establishing and expanding road beautification activities. Activities organized by employee volunteers are held once every two months at 22 plants and housing works under the slogan “Let’s clean up local roads, let’s expand our circle of activity.” These activities are also intended to enhance the environmental-consciousness of the general public for the success of the 2005 World Exposition, Aichi, Japan (EXPO 2005) to be held in Aichi Prefecture.

In FY2002, a total of about 10,000 people participated in activities held five times during the year and collected about 3,000 bags of trash.

Toyota Clean Net

Local Cleaning Activities

Disaster Volunteer Net

Fourteen companies of the Toyota Group jointly held the “Volunteer Plaza (All-Toyota Big Holiday),” which included a charity bazaar, the proceeds of which, plus solicited donations, totaling 567,327 yen were donated to Foster Care Society for Mentally and Physically Handicapped Children and Adults and other welfare facilities and organizations in Toyota City.

Donating Charity Bazaar Proceeds

In FY2002, Toyota carried out a variety of activities, including forest maintenance, holding a study meeting for volunteers involved in disaster response, holding social activities with an organization of handicapped citizens and driving shuttle buses for regional festivals. Through the steady accumulation of activities —from independently planned activities to those that meet the needs of local communities— Toyota is aiming to forge links with society.

In FY2002, a total of about 17,000 people participated in these activities.

Managing Director Shin Kanada (currently Managing Officer) also participated in beautification

activities in the area around the Tokyo head office

Charity bazaar

Toyota employees participate as volunteers in the reforestation project

In September 2002, with the objective of cooperating with local communities and promoting understanding of volunteer activities, Toyota carried out activities to clean up the banks of the Yahagi River, and also the central city streets. 1,743 participants, including 474 members of the general public, collected 387 bags of trash (a total weight of 1,230kg). In FY2002, the number of voluntary participants increased, indicating a higher degree of understanding and acceptance of the activities.

In April 2003, Toyota initiated the “Toyota Group Disaster V (Volunteer) Net” for the purpose of aiding the recovery of disaster victims and areas stricken by natural disasters. In the case of natural disasters occurring in Aichi Prefecture, Toyota is well prepared to make a quick response to emergencies.

When disasters occur, Toyota will cooperate with the government’s regional volunteer support headquarters to gather information on the disaster areas and on the needs of the disaster victims. The

information will be sent out to the registered members from headquarters via a network, and will become the basis for action.

Activities with Local Communities

74

Stakeholder Dialogs

In order to improve the quality of in format ion d isc losure for the environmental report, opinions on Toyota’s Environmental Report 2002 were solicited from eight NPO-related workers, two academic scholars and a corporate employee in a meeting held in July 2002. Toyota received a great deal of feedback expressing expectations for pioneering measures, including those who hoped that “the report would be used to put forth a long-term environmental vision” and “Toyota, as a corporate environmental leader, would come up with a new approach for the report.” Toyota also received editorial comments saying, for example, that “the report is too broad and it is difficult to determine what the main points are,” or “it may be more readable if the topics are narrowed down and followed by more detailed explanations.”

Toyota has taken into account these suggestions for the 2003 Report and made improvements to its reports on social aspects in addition to its environmental activities sections.

Feedback on the Environmental Report

Dialog with Stakeholders

In today’s climate where corporate act iv i t ies aimed at sustainable development are considered extremely important, society demands that corporations undertake operations by simultaneously incorporating technological innovation, economic principles, and broad-based consensus.

Following the activity in FY2001, Toyota held the “Second Toyota Stakeholder Dialog” in October 2002. Professor Masaharu Yagishita, of the Nagoya Univers i ty Graduate School of Environmental Studies, was invited to serve as the chairperson. Participants

from four societal segments —industry, government, academia and the general public— engaged in active discussions.

Based on the understanding that a major issue faced by management is how to engage in dialog with society, the goal of this event was to provide an opportunity to freely and vigorously exchange opinions and suggestions concerning Toyota’s management activities.

The theme this year was “Is it possible to achieve a green market?” Senior Managing Director Takashi Kamio opened the plenary meeting, which was followed by the keynote address, presentation of issues, and finally the splitting of the participants into three separate discussion groups to exchange their opinions. Improvements were made from the first meeting held last year by narrowing down the topics for discussion and implementing small discussion groups in the program so that everyone would have the opportunity to express their opinions. Toyota employees also participated in each of the discussion groups and took part in the discussions in an atmosphere of openness.

The small group discussions focused on three areas: (1) “How do we define a green market?”; (2) “What roles should corporations, consumers, governments and NPOs play in order to promote a greener market (structural change)?”; and (3) “What are the potential driving forces to achieve a green market?”

Some of the opinions freely expressed by participants during the discussions included: “Discussions seem to be lacking the perspect ive of consumers,” “Corporations and consumers have different notions of what eco products are,” “Are there other ways, apart from breakthroughs from leading companies, for environmentally sound products and green markets to exist in a Japanese cultural climate?” and “It is possible to achieve a green market as long as people

are motivated, and this will be carried out by NGOs and NPOs.”

Participants evaluated their experiences positively, expressing great satisfaction in exchanging opinions with people from different social backgrounds and sharing diverse ways of thinking about environmental issues. Toyota received a large amount of feedback and comments on the event, including hopes for the continuation of the program, calls for more young participants and consideration of regional diversity in selecting participants, as well as suggestions for improving future events.

Toyota will continue to implement such dialogs in the future, searching for ways to make them more effective, meaningful and imbued with a sense of Japan’s culture, while expanding their scope to encompass a greater variety of stakeholders.

Active discussions in small groups

Professor Masaharu Yagishita (Graduate School of Environmental Studies, Nagoya University)

Chairperson

A total of 31 persons, including eight members from NPOs, three from government agencies, nine from industry, seven from universities/ research institutes, and four from Toyota.

Participants

Program

Participants (31 persons)

Day 2Day 1

Industry9

NPOs8

Universities/Research institutes

7Government

3Toyota

4

(1) Keynote Address“Is it possible to achieve a green market?” – Presenting issues –

(2) Raising issues: A joint illusion called green market

(3) Raising issues: Is a green market achievable? From the perspective of consumers

(4) Raising issues: Is a green market achievable? From the perspective of business model creation

(5) Three discussion group meetings

(6) Plenary meeting (open discussion, conclusion)

Keyn

ote

Addr

ess

Dinn

er &

Soc

ial H

our

Repo

rt

Gene

ral D

iscus

sion,

Su

mm

ary

of D

iscus

sion

Raising issues from each segment

(consumers, government, industry)

Free discussion (clarification of points)

Small discussion groups

Stakeholder Dialog Program Summary

Stakeholder Dialog Program

75

Relations with StakeholdersSociety

Participation in WBCSDThe World Business Council for

Sustainable Development (WBCSD) is a coalition of 160 international companies from more than 30 countries united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance and social progress. The organization makes proposals and carries out practical activities from a global perspective. Toyota has been a member of WBCSD since its founding, and Honorary Chairman Shoichiro Toyoda currently serves as Vice Chairman of the organization.

Johannesburg Summit “Business Day”

The Johannesburg Summit: World Summit on Sustainable Development was convened by the United Nations in Johannesburg, South Africa from August 26 to September 4, 2002. At the Summit, the action plan “Agenda 21,” agreed upon at the 1992 Rio Summit, was reviewed and debates took place on new issues that arose in response to global changes over the past ten years.

During the summit “Business Day” —a side event co-sponsored by the WBCSD— Honorary Chairman Toyoda, as the vice chairman of WBCSD, introduced the Sustainable Mobility Project. In addition to the project’s interim report that mentioned “mobility is a natural desire of people,” “demand for mobility-use energy in developing countries will increase in the future” and “the importance of technological development,” he emphasized the significance of member companies carrying out discussions towards a common goal.

Dr. Toyoda also talked about the importance of increasing overall energy efficiency “Well to Wheel,”* striving for sustainable development, pursuing eco-efficiency (achieving efficiency of both ecology and economy).

Sustainable Mobility Project

*Overall energy efficiency (Well to Wheel):The energy efficiency obtained by multiplying “fuel efficiency (Well to Tank)” from the fuel extraction stage to refining and transportation to gas stations, by “vehicle efficiency (Tank to Wheel)” of an individual vehicle.

Hybrid Car Exhibited at Side EventToyota participated in a side event

at the Johannesburg Summit and exhibited the Estima Hybrid and FCHV-4, a fuel cell hybrid vehicle, at a booth in the Japan Pavilion, promoting its advanced environmental initiatives.

Toward Sustainable Mobility

http://www.sustainablemobility.org/

The Sustainable Mobility Project, WBCSD’s sector project, through the participation of 12 energy and automobile-related companies, aims to present a vision of sustainable mobility for the year 2030. Honorary Chairman Toyoda has been appointed as co-chair of this project.

“Mobility 2001,” a report compiled in 2001, indicated the current status and tasks regarding mobility, and upon this basis established ten research themes (workstreams), such as “sustainability indicators,” “fuels,” and “scenarios, vision and workshops.” “Sustainability indicators” is a working index underlying the overall workstreams and identifying 12 indicators. In selecting the indicators, the member companies studied issues included in “Mobility 2001,” while also incorporat ing the opinions of stakeholders.

In order to formulate a vision for the project, mobility workshops were held in various parts of the world, including Paris, Shanghai, Davos, Delhi, Nagoya, and Mexico City, and the network was expanded by incorporating opinions of a variety of stakeholders, such as government agencies, other industries, consumers, researchers and NPOs.

The final report “Sustainable Mobility 2030,” which will be published at the end of 2003 and integrates indicators covering economic growth, ecological balance, and social progress from the perspective of mobility, will present the project’s vision of sustainable mobility 30 years from now and identify pathways to get there.

1. Sustainability indicators2. Vehicle design and technology3. Fuels4. Infrastructure5. Demand for personal mobility6. Demand for goods and services mobility7. Policy measures8. Urban mobility9. Long-distance mobility10. Scenarios, Vision and Workshops

Workstreams of the Sustainable Mobility Project

Factors for Sustainable Mobility

1. Access to mobility2. User costs3. Travel time4. Reliability and comfort5. Safety6. Security7. Greenhouse gas emissions8. Impact on the environment and pubilic

well-being Conventional emissions (HC, CO, NOx, PM, SOx, Pb)

Impact on eco-system Transport-related noise

9. Resource use Transport-related energy use and security

Transport-related land use Transport-related material use

10. Impact on public revenues and expenditures11. Equity implications12. Prospective rate of return to private business

Dealers

76

Business Partners

Environmental & Social Report 2003

Relations with Japanese Dealers

Toyota sells automobiles and provides after-sales service to customers in Japan through a network of 308 car dealers* and approximately 5,800 vehicle sales outlets.

Since the establishment of a Toyota dealer in 1935 through the use of local capital, Toyota has developed a sales structure for Toyota vehicles based on the principles of independence and responsibility, that emphasizes local capital, and has made every effort to fulfill its responsibilities in a system of mutual trust.

Today, of 308 dealers, approximately 290 dealers are being managed with entirely local capital. In its relationship with dealers, Toyota has since its foundation respected the standpoint of its dealers, as exemplified by the following statement of Honorary Advisor Eiji Toyoda and Honorary Chairman Shoichiro Toyoda made at the time of the merger of Toyota Motor Co., Ltd. and Toyota Motor Sales Co., Ltd.: “Manufacture products with an awareness of the difficulty in selling them, and make every possible effort to sell those products.” Thus, Toyota and its dealers are in a relationship of reciprocal hard work.

Toyota concludes a Toyota Dealer Agreement with each of its dealers which specifies the mutual rights, obligations and responsibilities of both Toyota and the dealer. The basic contract is renewed once every three years following adequate consultation between Toyota and the dealers, taking into account changes in the business climate. For example, in its 2001 revision, provisions concerning consideration for the global environment were incorporated in the items for mutual responsibility. In the future, Toyota plans to make other appropriate changes to reflect other changes in the business environment.

Basic Contract with Dealers

Dealer PoliciesIn 1935, the late Shotaro Kamiya of

Toyota described Toyota’s sales philosophy in the following way: “Customer first, dealer second, manufacturer third.” In other words, “The order of persons benefiting from the sales of Toyota vehicles is first the customer, second the dealer, and last the manufacturer. This stance is the best means of securing the confidence of both customers and Toyota dealers, and the results will ultimately benefit Toyota.” To this day, Toyota promotes sales activities based on this concept.

Toyota believes that it is important to achieve the greatest overall effect by respecting the independence of its dealers and enabling them to realize their individual strengths. Also, in order to build relationships between Toyota as a manufacturer and dealers based on mutual benefit, Toyota engages in extensive communications and builds trusting relationships.

The prosperity of its dealers leads directly to Toyota’s prosperity, and Toyota believes that mutual benefit is the ideal stance for its relationship with its dealers. As a result, since its foundation Toyota has striven to create relationships based on mutual benefit.

Partnership with Toyota Motor Corporation

The first Toyota dealers selected Toyota as a business partner even prior to the Second World War because they could relate to Toyota’s sales principle of “Customer first, dealer second, manufacturer third.” The choice they made certainly was the right one.

Toyota and its dealers have long taken on the challenges of innovative sales policies, including the introduction of installment sales, emphasizing after-sales services, and promoting the shift from sales through personal visits to in-shop sales. Today, Toyota dealers lead domestic auto sales and maintain a market share of 40%, excluding minivehicles.

This has been possible because Toyota and its dealers engage in on-going communication and build relationships of mutual understanding and trust.

Toyota and its dealers are now undertaking the challenge of reviewing the channel system for spring 2004. Toyota and its dealers are prepared to undergo a certain degree of pain in conjunction with this reform, but without doubt the relationship between them is strong enough to withstand and overcome such pain.

July 2003

*Toyota National Dealers’ Advisory Council:An organization of 467 Toyota dealers that facilitates smooth communication between dealers and Toyota.

Nanao OguriPresident, Nagoya Toyopet Corporation

Chairman, Toyota National Dealers’ Advisory Council*

*Overseas, vehicle sales and after-sales service are conducted by distributors. The relationship between Toyota and overseas distributors is based on the same principles as the relationship between Toyota and Japanese dealers.

Toyota car dealer

Relations with Stakeholders

Suppliers

77

Business Partners

Relations with Suppliers

Toyota seeks to contribute to the “creation of a prosperous society through automobiles.” Toyota also seeks to contribute to society by providing customers with the most attractive products in the most timely manner. In order to achieve these objectives, the task of Purchasing is to ensure “long-term and stable procurement of the best products at the lowest price in the most speedy and timely manner.”

To do this efficiently, Purchasing needs to build the world’s No.1 supply base.

This is achieved by cultivating and deepening ties with suppliers who share the commitment for creating quality products for customers.

The second policy is “Mutual benefit based on mutual trust.” Toyota believes in developing mutually beneficial, long-term relationships based on mutual trust. To foster that trust, Toyota pursues close and wide-ranging communication with suppliers. One example is the establishment of the Suppliers Center within the Head Office site in Aichi Prefecture in March 1998. The Suppliers Center features numerous large and small presentation rooms and provides an opportunity for new product/technology presentation to suppliers worldwide regardless of their current business relationship with Toyota. Through such activities, Toyota tries to enhance communications with both Japanese and overseas suppliers.

Toyota’s Basic Purchasing Policy

The Mission of Purchasing

The third policy is “Contribution to local economic vitality through localization: good corporate citizenship.” As Toyota moves to globalize its operations, production outside Japan is increasing rapidly. Toyota will work to make an economic and industrial contribution that is fully commensurate with its market presence in each region. That includes purchasing parts and materials from local suppliers.

A meeting with a supplier

Toyota Suppliers Center

Guidelines are issued for different countries and regions

Presentation room

Environmental Actions Taken in Collaboration with Suppliers

See p. 12 for details on the Third Toyota Environmental Action Plan

See pp. 26 and 56 for details concerning the above activities

Another example is Toyota’s annual Global Suppliers Convention. The 2003 convention, which was held in February, was attended by around 380 suppliers. At the convention, Toyota presented it’s annual purchasing policy as well as awards to the suppliers who displayed significant achievements in quality, cost, technological development, etc.

The first policy is “Fair competition based on an open door policy.” Toyota is open to any and all suppliers, regardless of nationality, size, or whether they have done business with Toyota before. Toyota’s choice of suppliers is on the basis of purely business considerations. Toyota evaluates the overall strengths of prospective suppliers, including their quality, cost, technological capabilities, and reliability in delivering the required quantities on time, as well as their potential strengths, as evidenced in such ways as their amenability to continuing kaizen (improvements).

The following actions are underway in accordance with the Third Toyota Environmental Action Plan.

(1) Provision of the Purchasing Guidelines to Japanese and overseas suppliers and follow-ups (promotion of ISO 14001 certification, management of substances of environmental concern, and provision of data).

(2) Briefings and informational activities for suppliers in Japan concerning compliance with the EU ELV directive.

(3) Promotion of green purchasing (office supplies and equipment, work uniforms, etc.).

78

Relations with EmployeesEmployees

Environmental & Social Report 2003

Establishment of a relationship ofmutual trust and mutual respect

Company(companyprosperity)

Employees(stable and betterlifestyle; personal

growth)

Common values

Stable employment; maintenanceand improvement of good working conditions

Cooperation withcompany policies

Proud to work at ToyotaSatisfaction with work conditions

0

40

50

60

70

80

90

100(%)

’92 ’94 ’98 ’00 (FY)’02

Automobile manufacturing industry

Mutual Trust between Labor and Management

Employee Awareness (Administrative and Technical)

Labor-Management Relations

The basic concepts of mutual trust between labor and management are: improvements in the lives of employees are realized through the prosperity of the company, and labor and management thus share the same goal of company prosperity as a common value; management will take into consideration to the greatest possible extent stable employment and will continuously strive to improve working conditions; and employees will cooperate with the company’s policies in order to promote the company’s prosperity.

In the Labor and Management Resolutions for the 21st Century signed by labor and management representatives in 1996, mutual respect was added to mutual trust as a foundation of labor-management relations, and this is reflected in the current Guiding Principles at Toyota Motor Corporation.

Mutual Trust Between Labor and Management

Toyota’s labor-management relations are based on mutual trust between labor and management. Following a labor dispute in 1950, mutual trust between labor and management was adopted as the foundation of labor-management relations in the joint labor and management declaration concluded in 1962. Since then, repeated discussions have led to deeper understanding and trust between labor and management.

See p. 5 for details on the Guiding Principles at Toyota Motor Corporation

Employee guide to various hotlines

(1) As a global company, we will endeavor for the progress of the world economy, and at the same time contribute to international society.

(2) The relationship between labor and management shall be based upon mutual trust and respect.

(3) In order to create a company environment in which workers can fully utilize their potential and additional value can be obtained, we, labor and management will endeavor to faithfully perform the roles entrusted to us, while standing on common ground.

(4) We will contribute to the realization of a truly affluent society and life for working people, taking into consideration the future of Japan as a whole.

In order to create a relationship of mutual trust and respect between labor and management, personnel management is conducted in accordance with four basic principles: (1) Creating a workplace environment where employees can work with their trust in the company ; (2) Creating a mechanism for promoting constant and voluntary initiatives in continuous improvements; (3) Fully committed and thorough human resources development; and (4) Promoting teamwork aimed at pursuit of individual roles and optimization of the entire team.

Stable employment that avoids simple layoffs and terminations is a key pillar in the relationship of mutual trust between labor and management. In addition, the Toyota management system is based largely on bringing out to the greatest extent employee abilities, reasoning skills and creativity. Consequently, the simple disposal of human resources, a major management asset, not only damages the relationship of trust, but also hinders the spontaneous display of ability by employees. Accordingly, Toyota always takes a medium- to long-term management perspective and has made the realization and continuation of stable employment through all possible employment policies the fundamental basis of its management philosophy.

Basic Principles of Personnel Management

(1) Creating a workplace environment where employees can work with their trust in the company - Stable employment where layoffs and

dismissals are not readily made- Steadily maintain and improve working

conditions from a medium to long-term perspective

- Ensure fairness and consistency(2) Creating a mechanism for promoting

constant and voluntary initiatives in continuous improvements- Share the management mindset and sense

of critical urgency through thorough communication

- Reflect business results in working conditions(3) Fully committed and thorough human

resources development- Promote personal growth through work- Communication of the Toyota Way/role

(4) Promoting teamwork aimed at pursuit of individual roles and optimization of the entire team- Thorough consensus building and

achievement in single thrust- Team results and creating a sense of unity

In order to reflect the ideas and opinions of employees in corporate activities, in addition to promoting communication between employees of different rank within the company, Toyota has also established a Toyota Creative Suggestion System and started QC circle activities.

Toyota has established a number of hotlines for the fast and fair resolution of issues related to compliance, gender harassment, mental health and working conditions. The employee awareness survey conducted every year indicates that “pride in the company” and “employee satisfaction”

Creating Good Workplace

Stable Employment Labor and Management Resolutions for the 21st Century (Summary)

Relations with Stakeholders

79

Employees

Name of Meeting

Safety and Health Committee,Company

Manager’s Organization Staff, etc.

General Safety and Health Supervisor,Company (Executive Vice President)

General Safety and Health Vice Supervisor, Company(Director in charge of S&H Promotion Div.)

Deputy (General Manager,Plant Administration Div.)

General Safety and Health Supervisor, Plant(Plant General Manager)

Safety and Health AdministrativeSupervisor (General Manager, Safety

and Health Promotion Division)

Safety SupervisorHealth Supervisor

Industrial Hygiene Engineering Health SupervisorWorking Environment Measurement Expert

Industrial Nurse

Safety and Health Promotion Division

Department/Section Safety and HealthSupervisor (Manager)

Operation Chief

Safety and Health Promotion Member(Manager of each workplace)

Division Safety and Health Supervisor(General Manager)

Fulltime Safety and Health Supervisor(Safety and Health Manager)

AdministrativeIndustrial Physician

IndustrialPhysician

Deputy Safety and HealthSupervisor Meeting

Plant Safety and Health Committee

Safety and HealthManager Meeting

Division Safety and HealthCommittee Meeting

Department/Section Safety andHealth Committee Meeting

All industries

Manufacturing industries

Automobile manufacturing industry

Automobilemanufacturing industry

Toyota0

0.5

1

1.5

2

*The figures for all industries, manufacturing industries and the automobile industry for 2002 are preliminary

’98 ’99 ’00 ’01 ’02 (Year)

30’98 ’99 ’00 ’01 ’02

40

50

60

(%)

(Year)

Safety and Health Meeting

Safety and Health Promotion Organization and Structure

Industrial Accident Frequency(Frequency Rate of Lost Workday Cases)

Trend in Percentage of Completely Healthy Employees

5-Year Policy (2000 - 2004)

Safety and Health

Beginning with development of activities which demonstrate assurance of zero accident record, Toyota has developed a range of independent accident prevention activities. Although the number of STOP61-type accidents and designated occupational diseases2 in FY2002 were the fewest to date, the goal of zero was not reached. Nonetheless, through these activities, results have been achieved in terms of workplace management and environmental improvements, including the strengthening of workplace teamwork and the improvement in the inherent safety3 of equipment.

Safety, along with quality and the environment, is an important topic relating to the very foundation of a corporation. Based on the philosophy of “Respect for People,” and the fundamental policy that “Safety is management itself” and “it is everyone’s responsibility, from senior executives to every employee at the workplace, to place safety first,” Toyota is making an effort to create a safe and energetic work environment.

Main Action Taken in FY2002

1. Zero STOP6-type accidents and designated occupational diseases by reinforcing the proactive prevention system and structure

2. Building a workplace environment which is healthy for the mind and body

1. Development of activities which demonstrate assurance of zero accident record (for STOP6+accidents which occur in each shop, occupational diseases)

2. Pursuit of inherent safety based on risk assessment while guaranteeing and maintaining safety functions

3. Development of measures for ergonomic (musculoskeletal) disorders with overseas in view

4. Steady implementation of measures against noise and dust

5. Strengthening of management and guidance for construction work by contracted companies on Toyota’s

1. STOP6: Safety Toyota 0 (zero accidents) Project 6 Activities to prevent six types of accidents which may cause death or disability (caught in machines, contact with heavy objects, contact with vehicles, falls, electrocution, and contact with heated objects)

2. Designated occupational diseases: Injury from dust and noise, or musculoskeletal disorders

3. Inherent safety: Completely eliminate or reduce the risk of accidents associated with work or equipment so as to pursue intrinsic safety at the workplace at the equipment design stage

Toyota is conducting employee health checks, including items required by law as well as its own items. In 2002, the percentage of completely healthy Toyota employees4 was only 55%, falling short of the goal of 70%. Participation in lifestyle guidance meetings, one measure toward early recovery, was 75%, a lower percentage than the previous year. The ratio of Toyota employees whose health-related work restrictions were lifted5 to those who participated in the lifestyle guidance meetings was, however, twice as high as that of the

previous year. As an activity to prevent lifestyle-related

diseases, Toyota is conducting a lifestyle improvement campaign and recreational activities, through which it is making efforts to promote better health. Toyota also provided education and information to improve the awareness of each employee, which is necessary to develop better lifestyles. In the future, Toyota will employ the Meal Check System6 and begin instructing employees on how to improve their dietary habits and

Safety and Health

Building Good Health

4. Completely healthy Toyota employees: Ratio of those with the A rank of health management ratings (no problems found during health checks, and not receiving medical treatment)

5. The ratio of Toyota employees whose health-related work restrictions were lifted:

6. Meal Check System: A system for confirming and evaluating individuals’ food consumption patterns, using data of their food and drink consumption in the cafeteria

Regarding mental health at the workplace, in addition to education in traditional knowledge, all of the newly appointed managers and supervisors undergo active listening courses7 that are effective in the prevention and early detection of mental problems. In FY2002, 810 newly appointed department general managers, group managers, and others at Toyota received this training.

Regarding individual mental health care, by strengthening ties among personnel, the workplace, and workers’ families, Toyota is improving its follow-up system for people who are on leave.

Through these activities, Toyota aims to create a workplace with better communication

Learning communication techniques at an active listening course

7. Active listening courses: Experiential training in methods of building good communication through understanding and sympathy for others’ feelings and emotions; a technique of active listening

Mental Health Care

x 100

Number of employees whose health-related work restrictions were liftedNumber of participants in lifestyle

guidance meetings

80

1. Professional Staff: Associates who can create added value on their own and contribute to society, as well as utilize their strengths and exercise teamwork

2. T Shaped Human Resources:Team members with a broad range of skills, such as English language skills and operational knowledge (the crossbar of the “T”) as well as highly specialized knowledge and experience in a particular field (the vertical bar of the “T”)

“Toyota — Developing People” booklet

Human Resources Development

In order to carry out the Guiding Principles at Toyota Motor Corporation, in April 2001 Toyota adopted the Toyota Way 2001, an expression of the values and conduct guidelines that all employees should embrace. In order to promote the development of Global Toyota and the transfer of authority to local entities, Toyota’s management philosophies, values and business methods, that previously had been implicit in Toyota’s tradition, were codified. Based on the dual pillars of “Respect for People” and “Continuous Improvement,” the following five key principles sum up the Toyota employee conduct guidelines: Challenge, Kaizen (improvement), Genchi Genbutsu (go and see), Respect, and Teamwork. In 2002, these policies were advanced further with the adoption of the Toyota Way for individual functions, including overseas sales, domestic sales, human resources, accounting, procurement, etc.

A Shared Toyota Way

In January 2002, the Toyota Institute was established as an internal human-resource development organization that aims to reinforce the organic integration of global Toyota companies by way of sharing the Toyota Way as well as to promote self-sufficiency. The purpose behind the Toyota Institute’s establishment is to promote the human resources development of global Toyota in order to promote true globalization and to realize the advancement of Toyota’s core values. TMC President Fujio Cho is the Toyota Institute’s first president, with 16 full-time associates managing the business.

Within the Toyota Institute, the Global Leadership and the Management Development Schools constitute the specific content of the training programs.

In 2002, the Toyota Institute conducted training programs targeting global leadership candidates from TMC and overseas companies and for middle management personnel to enhance understanding of the Toyota Way, enable best practice sharing and drafting of action plans, as well as contribute to the creation of a global human network.

Toyota Institute

Toyota conducts systematic company-wide and divisional training and assignments for training purposes with an emphasis on on-the-job training (OJT) to ensure that associates can fully utilize their abilities.

Toyota has defined the required qualifications of “professional staff”1 for office and engineering positions, and “T shaped human resources”2 who are able to perform day-to-day activities and expand their skills in technical positions. Company-wide training is conducted based on employee qualifications, as well as specialized training for individual divisions, language training, and special knowledge and skill training.

In October 2002, Toyota created the booklet “Toyota — Developing People” and distributed it to all associates to create a common understanding that “the source of Toyota’s competitiveness is human resources development” and to promote the creation of workplaces where personnel development takes place at all sites and at all levels.

Fully Committed and Thorough Human Resources Development

“Because people make our automobiles, nothing gets started until we train and educate our people.” As seen in these words, which were expressed by Honorary Advisor Eiji Toyoda, Toyota seeks to develop human resources through the activity of making things. Toyota believes that the development of human resources requires the handing down of values and perspectives. In conjunction with the geographic expansion of business and the growth of business areas, undertaking global actions for the development of human resources has become a priority issue. Toyota is building both tangible (a new learning facility) and intangible (course content) structures relating to team member development that ensures a secure and steady flow of qualified human resources to conduct Toyota’s global business in the 21st century.

Global Leadership School

Objective

Challenge

Improvement

Genchi Genbutsu

Respect

Teamwork

ContinuousImprovement

Respect for People

Development of executive human resources capable of showing leadership from a global perspective

Content

Attendants Future global leaders from around the world

Knowledge/Skill training

Training based on staff qualifications OJT

Advanced training for assistant managers

Orientational training for newly promoted assistant managers

Advanced training for specialists

Orientational training for newly promoted specialists

Advanced training for assistants

Introductory training for newly-joined staff

Management Development School

ObjectiveTraining of management to systematically understand and implement the Toyota Way as it relates to each core business area (production, sales, etc.)

Content

Production: Understanding of the Toyota Way at various functions at Toyota’s manufacturing companiesSales: Understanding of the latest marketing methods, etc., based on the Toyota Way in sales and marketing

Attendants Middle management from around the world

Self-

deve

lopm

ent

Lang

uage

trai

ning

Focu

sed

OJT

with

spe

cial

them

es

Outline of Training Programs

Company-Wide Training to Support Professional Staff

Key Principles of The Toyota Way 2001

Enhanced leadership ability based on the Toyota Way

Reinforced business management knowledge and skills

Global human networking

Relations with Stakeholders

81

Employees

Diversity and Equal Opportunities

With the on-going changes in the labor market environment, due to such factors as the globalization of business and social advances of women, one major task for increasing a company’s competitiveness is to have management that can make use of human resource diversity. In 2002, Toyota started a Diversity Project based on the concept expressed in Toyota’s Global Vision 2010 of “promoting the creation of environments featuring people from around the world with various abilities and values who are given the opportunity to experience self-realization as individuals.” Through this, Toyota aims to increase its employees’ motivation and optimize the value of its human resources.

As of March 2003, Toyota had approximately 5,800 female employees, accounting for 9% of the total workforce, but the number of women employed has grown steadily each year as female students’ awareness increases.

Toward Promotion of Women’s ParticipationIn 2002, based on the principle of

respecting diversity and with the aim of reforming management throughout the company, Toyota set its sights on women’s participation, reviewing its arrangement with regard to female employees, and taking steps to put a better environment in place. In order to promote the creation of an environment more conducive to participation by motivated female employees, Toyota has made a three-pronged effort to: (1) Help enable women to work and raise children at the same time; (2) Assist in women’s career building, and (3) Reform the working environment and employee awareness. Toyota has also introduced flexible working arrangements and constructed child-care facilities at business sites.

Employment of Disabled PersonsAs of March 2003, Toyota employed about

800 disabled people in many kinds of positions at various workplaces. Toyota believes in helping the disabled achieve autonomy within society, and makes it a basic rule to have them work together with other employees. Human consideration is given to the conditions of their disability at the business sites and ways are devised to accommodate them in workplace facilities so as to create a workplace environment that is safe and easy to work in.

As of the end of March 2003, Toyota’s disabled employees ratio was 1.95%, exceeding the 1.8% Legal Employment Quota.**Legal Employment Quota:In accordance with the “Law for Employment Promotion, etc. of the Disabled,” private companies normally employing 56 or more employees are obligated to employ disabled people (either physically or intellectually disabled) at a ratio exceeding 1.8% of their total workforce

Best Practice Career Design Forum

With the objective of assisting women’s career building, Toyota held the Career Design Forum in November 2002 for about 400 female employees.

The purpose was to help the women build a network within the company and to give them the motivation to create their own career visions independently and actively.

Toyota plans to enhance similar initiatives in the future.

Best Practice Facility to Help Child Rearing “Toyota Child Care Bubu Land”

In March 2003, the “Toyota Child Care Bubu Land,” an on-site childcare facility (in Toyota City, Head Office area), was opened so that all employees, both male and female, who wished to continue working while raising children could do so without worry. The facility has many useful features, which include having a resident nurse on the staff and staying open until 10:30 pm. One female employee using the facility (with a one-year-old child in care) expressed her sentiments in the following

way: “It’s located at the company, so drop-off and pick-up are easy, and I can continue working without having to worry if extra work should suddenly crop up.”

See pp. 4 - 5 for the Global Vision 2010

System introduced in 2002

50

0’98 ’99 ’00 ’01 ’02

100

150

200

153

(Number of people)

(FY)

(FY)’98 ’99 ’00 ’01 ’02

(%)

20

10

0

30

40

’98 ’99 ’00 ’01 ’02(FY)

0

1.8Legal Employment

Quota

33%1.95%

*A system similar to the child rearing system is used in the case of nursing care

Birth 1stYear

2ndYear

6thYear

8thYear

Child rearing leave

Work hours reduction measure A(at workplaces where flextime is not used)

Work hours reduction measure B(at workplaces where flextime is used)

Discontinuation of core time under flextime system

Working partially at home

Special breaks for child nursing care (five days/year)

Exclusion from late night duty and limitation of after-hours work(up to 24 hours/month, or 150 hours/year)

Use of childcare facilities within the workplace

Trends in Number of Employees Taking Child Rearing Leave

Trends in Ratio of Female Employees (Example of Administrative Positions)

Trends in Toyota's Disabled People Employment Ratio

System for Helping Employees Accomplish both Child Rearing (or Nursing Care) and Work

Economic Performance

82

Shareholders

Environmental & Social Report 2003

0

2,000

4,000

6,000

8,000

10,000(Billion Yen)

(Yen)

(Billion Yen)

(Billion Yen)

Net sales

Operating income

Ordinary income

Net income

Total assets*

Shareholders’ equity*

Return on equity (ROE)

Net income per share

Net equity per share*

Capital investment

R&D expenses

Number of vehicles produced

Number of vehicles sold

Number of employees*

8,739.3 billion yen

861.3 billion yen

892.6 billion yen

634.0 billion yen

8,592.8 billion yen

5,703.3 billion yen

11.2%

178.12 yen

1,652.15 yen

269.3 billion yen

581.2 billion yen

3,513,887 vehicles

3,559,826 vehicles

65,551

16,054.2 billion yen

1,363.6 billion yen

1,414.0 billion yen

944.6 billion yen

20,742.3 billion yen

7,460.2 billion yen

12.8%

272.75 yen

2,226.34 yen

993.5 billion yen

671.6 billion yen

5,982,966 vehicles

6,246,156 vehicles

264,096

Unconsolidated Base Financially Consolidated Base

7,903.5 8,284.98,739.3

’98 ’99 ’00 ’01 ’02

’98 ’99 ’00 ’01 ’02 ’98 ’99 ’00 ’01 ’02

’98 ’99 ’00 ’01 ’02

(rounded to the nearest 100 million yen)

0

200

400

600

800

1,000

578.0621.7

892.6

0

50

100

150

200

70.61

128.56

178.12

0

100

200

300

400

500

600

448.1402.8

243.8 257.9

527.3

428.3

329.7

Capital investment R&D expenses581.2

269.3271.4

541.8

768.97,525.5 7,408.0

87.61 89.25

*As of the end of March 2003

Sales Status (April 2002 - March 2003)

Trend in Unconsolidated Net Sales

Trend in Unconsolidated Net Income per Share

Trend in Unconsolidated Operating Income

Trend in Unconsolidated Capital Investment and R&D Expenses

In order to achieve “compatibility between the environment and the economy,” “fulfill responsibility towards society,” and gain the trust of all stakeholders, including shareholders, local communities, customers, suppliers and

employees, long-term stable growth is an indispensable factor. Representative economic performance indicators for Toyota are shown below. For further details, please visit the website to the right.

http://www.toyota.co.jp/en/ir.html

Economic Performance/Company Outline

Company Outline

83

Head Office

1, Toyota-cho, Toyota City, Aichi Prefecture 471-8571, JapanTEL: 81-565-28-2121

Tokyo Office

4-18, Koraku 1-chome, Bunkyo-ku, Tokyo 112-8701, JapanTEL: 81-3-3817-7111

Name TOYOTA MOTOR CORPORATION

Date of establishment August 28, 1937

Principal operations Manufacturing and sales of automobiles and housing

Capital 397.0 billion yen

Number of shareholders 381,901

Total number of shares issued 3,609,997,000

Stock exchanges on which the shares are listed

Japan: Tokyo, Nagoya, Osaka, Fukuoka and Sapporo Stock Exchanges

Major production bases in Japan

Other major operations bases

Nagoya Office23-22, Izumi 1-chome, Higashi-ku, Nagoya, Aichi PrefectureTEL: 81-52-952-2111

Osaka Office3-11 Minami-Semba 4-chome, Chuo-ku, Osaka-shi, OsakaTEL: 81-6-6251-3300

Higashi-Fuji Technical Center1200 Onjuku, Susono City, Shizuoka PrefectureTEL: 81-55-997-2121

Overseas: New York and London Stock Exchanges

*Capital and number of shareholders are as of the end of March 2003. Capital is rounded to the nearest 100 million yen.

Company outline: http://www.toyota.co.jp/IRweb/corp_info.htmlInvestor relations:http://www.toyota.co.jp/en/ir.htmlPress releases:http://www.toyota.co.jp/IRweb/corp_info/news/index.html

Environment:http://www.toyota.co.jp/IRweb/corp_info/eco/index.htmlSafety:http://www.toyota.co.jp/IRweb/corp_info/safe.htmlPhilanthropy:http://www.toyota.co.jp/IRweb/corp_info/com.html

W e b s i t e s

Automobile: Honsha Plant, Motomachi Plant, Kamigo Plant, Takaoka Plant, Miyoshi Plant, Tsutsumi Plant, Myochi Plant, Shimoyama Plant, Kinuura Plant, Tahara Plant, Teiho Plant, Hirose Plant

Housing: Kasugai Housing Works, Tochigi Housing Works, Yamanashi Housing Works

For an overview of the above plants and housing works and details on their environmental activities, please visit the website below.

http://www.toyota.co.jp/en/envrep03/plantdata/